Apple’s supply chain in trouble?

How should Apple respond to the threat of nimble innovators coming out of Asia?

Apple’s supply chain model is distinct from many others in the consumer technology sectorPhoto: AFP

Roy Williams, managing director at Vendigital

7:00AM GMT 23 Mar 2014

The Apple rumour mill has been rumbling again, this time suggesting that supply chain challenges might be proving too much. While Apple itself is unlikely to confirm or deny such rumours, it seems that that the ‘iPad Pro’ – a larger version of the iPad, equipped with a 12.9-inch screen, which was planned for launch later this year – may have been shelved based on market feedback. The sapphire-screened iPhone 6 also may not make it to market this year, possibly due to a shortfall in production capacity at the company’s Arizona facility.

Apple’s supply chain model is distinct from many others in the consumer technology sector. It is structured to give the company maximum visibility and, importantly, control over the design and make-up of its products, even down to the smallest components. Over time, the business has sought to increase its control over its supply chain by investing in the manufacture of its own components and placing large advance orders to secure key supplies where needed. In the most recent development, Apple has gone on a talent spending spree in Asia to recruit engineers and supply chain managers who might be able to speed up its product development to compete with the high volume of mobile devices coming out of China and Taiwan. While this approach has clearly served the business well to date, recent shifts in the mobile device supply chain, which are enabling rival products to come to market more quickly, may now be putting Apple’s supply chain model under increasing pressure.

So how should Apple respond to the threat of nimble innovators coming out of Asia? The first step would be to find ways to increase the agility of the supply chain so it can respond more swiftly to market feedback and make it less critical that the business backs the right technologies from the start. If the rumours are right, it would seem that when it comes to ‘glass’, the company lacks a ‘plan B’ and this is making it seem big and slow by comparison with some other innovators in the marketplace. As things stand, Apple has invested $578m in the construction of its Arizona sapphire plant and if sapphire-screen technology fails to make it to market this year, there will be a window of opportunity for rival innovators to come up with something that performs better. If this happens, then the company’s substantial up-front investment in sapphire glass could well turn out to be money wasted.

To guard against this industrial-scale supply chain risk, Apple should consider adopting a more agile approach in future. This could involve having a ‘plan B’ to fall back on, which might include investing in an alternative technology, for example. This would allow them to switch development focus in response to market feedback or to the occasional hiccups that can arise when developing cutting edge technologies.

A top concern for businesses that seek to involve more than one supplier is of course how to maintain sufficient control over process quality and this is likely to be the main sticking point for Apple when considering increasing its supply base. However, the company has little to fear, as introducing an alternative supplier will in most cases help to create competition and this will itself help to drive quality.

It is unlikely that Apple will want to transform its supply chain model entirely – after all, it can demonstrate a proven track record of success. But introducing some agile refinements that give them more choice over emerging technologies, while building in capacity contingency and introducing an element of competition, could help Apple to hold on to its consumer technology top spot for many years to come.

Roy Williams is managing director at Vendigital, a firm of supply chain consultants operating globally and across industry sectors.